Retail
Management
MBA IVth SEM
Topics Covered
1. Introduction to retail
2. Retail as a career
3. Retail in India
4. Retail models
5. Theories of retail development
6. Understanding the retail consumer
7. Ethical issues in retailing
8. Retail marketing strategy
9. Retail franchising
10. Retail store locations
11. Retail site selection
12. Retail store design
13. Visual merchandising
14. CRM in retailing
15. Basics of retail merchandising
16. Process of retail merchandising
17. The method of merchandise procurement-I
18. The method of merchandise procurement-II
20. Retail pricing
21. Evaluating merchandise performance
22. Retail communication mix
23. Retail store operation
24. Servicing the retail customer
25. Retail HRM
26. Financial aspect of retail management
27. Presentation
28. Retail information system
29. E-commerce or e-tailing, EDI
30. Supply chain management
SMMC828
RETAIL MANAGEMENT
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Course Objective: The objective of the course is providing insights on retail operations.
This will enable the students to become good retail planners and decision makers and help
focus on change and adaption to change
UNIT I
Introduction to Retail: retail in India; retail models and theories of retail development;
understanding the retail consumers; ethical issues in retailing
UNIT II
Retail Marketing Strategy: retail franchising; retail store location and site selection;
retail store design and visual merchandising; customer relationship management in
retailing
UNIT III
Basics of Retail Merchandising: the process of retail merchandising; the method of
merchandise procurement; retail pricing and evaluating merchandise performance; retail
communication mix
UNIT IV
Retail Store Operations: servicing the retail customers; retail human resource
management; financial aspects of retail management; retail information system; supply
chain management in retailing
Text Book:
Pradhan, Swapna; Retaling Management;Tata McGraw Hill; New Delhi
Suggested Reading:
1. Bajaj, Chetan, Tuli, Rajnish and Srivastava, Nidhi; Retail Management; Oxford
University Press; New Delhi
2. Berman, Barry & Evans, Joel R.; Retail Management –A strategic approach
3. Pearson Education/Prentice Hall of India; New Delhi
4. Levy, Michael & Weitz, Barton A.; Retailing Management; Tata McGraw Hill;
New Delhi
5. Newman, Andrew J. & Cullen, Peter; Retailing –Environment and Operations;
Thomson
6. Asia Pvt. Ltd.; New Delhi
7. Dunne, Patrick M., Lusch, Robert F & Griffith, David A.; Retailing;Thomson
Asia Pvt. Ltd; New Delhi
8. Lamba, A.J.; The Art of Retailing; Tata McGraw Hill; New Delhi
Unit-I
Lecture no.:1
Topic: Introduction of Retail
What is Retail?
Retail is the final stage of any economic activity. By virtue of this fact Retail occupies an
important place in the world economy. In an attempt to understand the scope of the term
retail, various definitions of the term have been examined.
According to Philip Kotler: "Retailing includes all the activities involved in selling goods
or services to the final consumers for personal, non-business use. A retailer or retail store
is any business enterprise whose sale volume comes primarily from retailing. Any
organisation selling to final consumers whether it is a manufacturer, wholesaler or retailer
is doing retailing It does not matter how the goods services are sold (by person, mail,
telephone, vending machine or internet or where the are sold - in a store, on the street or in
the consumer's home)" .
The North American Industry Classification System (NAICS) specifies that the retail trade
sector comprises establishments primarily engaged in retailing merchandise, generally
without transformation, and rendering services incidental to the sale of merchandise.
The word retail is derived from the French word ‘retaillier’, which means to cut off a piece
or to break the bulk. A retailer may be defined, as a 'dealer or trader who sells goods in
small quantities' or 'one who repeats or relates'.
Retailing thus may be understood as the final step in the distribution of merchandise, for
consumption by the end consumers. Put simply, an firm that sells products to the final
consumer is performing the function of retailing. It thus consists of all activities involved
in the marketing of goods and services directly to the consumers for their personal, family
or household use.
It is necessary to understand that in the complex world of trade today, retail would include
!2.0t only goods but also services, which may be provided to the end consumer. In an age
where the customer is the king and marketers are focusing on customer delight, retail may
be redefined as the first point of customer contact.
Functions of a Retailer:
From the customers’ point of view, the retailer serves him by providing the goods that he
needs in the required assortment, at the required place and time. From an economic
standpoint, the role of a retailer is to provide real added value or utility to the customer.
This comes from four different perspectives:
1. First is utility regarding the form of a product that is acceptable to the customer. The
retailer does not supply raw materials, but rather offers finished goods and services in a
form that the customers want. Retailer performs the function of storing the goods, and
providing us with an assortment of products in various categories.
2. He create; time utility.-by keeping the store open when the consumers prefer to shop.
3. By being available at a convenient location, he creates .place utility.
4. Finally, when the product is sold, ownership utility is created.
THE CHALLENGES FACING GLOBAL RETAILERS
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The Emergence Of New Market
The Empowered Consumers
Technology Enabled Efficiencies
The Rise Of E-Age
Lecture no.: 2
Topic: Retail as a career
RETAIL AS A CAREER
Retail is a people-centric industry, and is one industry which simultaneously can expose
you to many skills and disciplines. It offers many choices in terms of a career, chief among
them are:
Buying and Merchandising
Merchandising and Buying is often termed as a combination of art and statistics. It is a key
function for any retailer as this department is responsible for the procurement of
merchandise to be sold in the stores by it, sourcing it from vendors or manufacturers. Key
tasks in this career area include the selection of vendors, costing of merchandise procured,
allocation of merchandise to the stores, developing distribution plans and calculating gross
margins. A key aspect to be remembered is that very often, it may require extensive
traveling to locate vendors and exclusive merchandise for the retail stores.
Marketing
In retail, marketing functions may be centralized and may include different departments
like advertising, sales promotion, and public/press relations. Marketing would also look at
ways of understanding the customer and his behavior by way of focus groups and analysis
of customer buying patterns to develop strategies and plans that guide marketing
components like advertisement, websites, store signage, etc. The size of the retail
organization would determine whether various functions would be in one department or
would be divided into various combinations.
Store Operations
Retail professionals in the store operations career area oversee the overall store operations
and profits. Positions include Head of Store Operations, Regional Manager and District
Manager, and responsibilities in this area may include managing staff functions like loss
prevention and/or human resources. Responsibilities in operations may vary from being
responsible for a department, floor, the entire store or a group of stores.
Very often, sales is considered to be a part of store operations. Positions in sales include
sales associate, cashier, store stock associate and stock receiver.
The primary duty of a sales staff is to serve customers on the selling
floor, actually selling goods. However In front-end sales staff may also be involved in
receiving merchandise into the store, counting it and then displaying it on the store shelf.
Responsibilities would also include receiving merchandise returned by customers. These
front-end positions need the ability to deal with people, flexibility and importantly, the
ability to working teams.
Finance
The finance retail career area includes all accounting and treasury functions like accounting
for income, paying expenses, compiling and maintaining financial records, money
management and cash flow control, banking, investment and managing credit lines.
Auditing of stores for merchandise and money may also be a part of the responsibilities of
this department. With the rapid development of retail in the country, understanding and
implementing project finance may also emerge as a key area of responsibility in the next
few years.
Human Resources
Human Resource in retail may range from recruiting and hiring employees to larger areas
like identifying training needs at various levels within the organization and then designing
and implementing the programmes. Responsibilities may also include overseeing
compensation and benefits, and planning for and ensuring legal compliances in hiring and
employment practices. It is necessary to remember that retail is a people focused business,
but at the same time, it calls for long working hours at both the front and back end. The
Human Resources department needs to understand these aspects of the retail business while
creating and implementing performance appraisals and promotions.
Technology and e-commerce
Retail is one of the most mature users of information technology. From RFID
implementation to e- technology-driven training programs delivered over satellites or the
internet, to state-of-the-art cash register and credit systems. Careers in this department may
involve the overall responsibility for the data processing efforts within the chain, including
systems design, programming, computer operations, and information systems (IS). A
retailer who has a presence in the e-commerce segment may also look for individuals who
may be made responsible for strategy development, procurement of merchandise,
fulfillment of orders and payments as specific areas.
Visual Merchandising
Visual merchandising is largely associated with creating the look of the store. Visual
merchandisers are responsible for the total merchandise or service presentation, the overall
business image, and even the building and placement of design elements. The increase in
competition has necessitated retailers to differentiate themselves from the competition.
While products and services are the primary methods of differentiation, visual
merchandising is fast becoming an area of differential advantage, as it is believed that
attractive displays attract and stimulate, which in turn is believed to cause increased sales.
Supply Chain Management and Logistics
Supply chain management and logistics are fast emerging as key focus areas in retail.
Supply Chain Management is the integrated management of the flow of materials and
products, services and information from raw material suppliers, through operations, to the
final customer and back again. Supply chain management and logistics is an integral factor
affecting cost. Effective management of the supply chain enhances profitability.
Depending on the size of the organization, a job in supply chain management may involve
analyzing and negotiating contracts with suppliers, manufacturers and/or distributors,
capacity and production planning, resource allocation and facility location and scheduling
the transportation and logistics of a product/service to its final destination.
Lecture no.: 3
Topic: Retail in India
The Evolution of Retail in India
While barter would be considered to be the oldest form of retail trade, since independence,
retail in India has evolved to support the unique needs of our country, given its size and
complexity. Haats, Mandis and Mela’s have always been a part of the Indian landscape.
They still continue to be present 'in most parts o[ the country and form an essential part of
life and trade in various areas.
Traditional Indian Retail-Some Facts:
Haats: Haats are periodic markets that form a major part of the rural market system in
India. This is a location which witnesses a public gathering of buyers and sellers at fixed
times and at fixed locations.
Some interesting facts about Haats are:
Average sale per day: Rs. 2.25 lakh
Number of sales outlets per haat: 300 +
Number of visitors per haat: 4,500 +
Average sale per outlet: Rs 900
Villages covered by a 'mat: 20 – 50
Melas: Melas are fairs, and they can range from commodity fairs to religious fairs.
Virtually every state in India has melas for which it is known; it is estimated that more
than 25,000 melas are held annually in the country. It is also estimated that the average
outlets in every mela would be more than 800 and the average sale per mela would be
Rs.1431akh.
Mandis: Mandis are market set up by the state government for the sale of agricultural
produce directly from the fanners. Close to 6,800 Mandis exist in India and are believed
to cater to a population ofl.36Iakh.
The PDS or the Public Distribution System would easily emerge as the single largest retail
chain existing in the country. The evolution of the public distribution of grains in India has
its origin in the 'rationing' system introduced by the British during World War II. The
system was started in 1939 in Bombay and subsequently extended to other cities and towns.
By the year 1946, as many as 771 cities/towns were covered. The system was abolished
post war, however, on attaining Independence, India was forced to reintroduce it in 1950
in the face of renewed inflationary pressures in the economy.
The system however continued to remain an essentially urban oriented activity. In fact,
towards the end of the first five-year plan (1956), the system was losing its relevance due
to comfortable food grains availability. At this point in time, PDS was rell1trooucedand
other essential commodities like sugar, cooking coal, and kerosene oil were added to the
commodity basket of PDS.
The Khadi & Village Industries (KVIC) was also set up post Independence. Today, there
are more than 7,000 KVIC stores across the country. Retail Snapshot 2.2 focuses on the
growth of KVIC as an Indian retailer. The co-operative movement was again championed
by the government, which setup the Kendriya Bhandars in 1963. Today, they operate a
network of 112 stores and 42 fair price shops across the country. Mother Dairy, another
early starter, controls as many as 250 stores, selling foods and provisions at attractive
prices. In Maharashtra, Bombay Bazaar, which runs stores under the label Sahakari
Bhandar and Apna Bazaars, runs a large chain of co-operative stores.
Fig.: Evolution of Retail in India.
Lecture no.: 4
Topics: Retail Models
Retail models
Various retail models exist in the world of retail. To start with, let us first understand
what a business model in retail entails. A business model is the manner in which a
business chooses to serve its customers and stakeholders. In retail, a business model
would dictate the product and/or services
Classification:
Lecture no.: 5
Topic: Theories of Retail
Theories of Retail Development
Retail development can also be looked at from the theoretical perspective. No single theory
can be universally applicable or acceptable. The application of each theory varies from
market to market, depending on the level of maturity and the socio-economic conditions in
that market.
The theories developed to explain the process of retail development revolve around the
importance of competitive pressures, the investments in organisational capabilities and the
creation of a sustainable competitive advantage, which requires the implementation of
strategic planning by retail organisations Growth in retail is a result of understand in market
signals and responding, to the opportunities that arise in a dynamic manner. Theories of
retail development can broadly be classified as:
1. Environmental- where a change in retail is attributed to the change in the environment
in which the retailers operate.
2. Cyclical- where change follows a pattern and phases can have definite identifiable
attributes associated with them.
3 Conflictual- where the competition or conflict between two opposite types of retailers,
leads to a new format being developed.
Environmental Theory
Darwin's the of natural selection has been popularized by the phrase "survival the fittest".
Retail institutions are economic entities and retailers confront an environment which is
made up of customers, competitors and changing technology. This environment can alter
the profitability of a single retail state as well as-of clusters and centers. The environment
that a retailer competes in is sufficiently robust to squash any retail form that does not
adjust.
Thus, the birth, success or decline of different forms of retail enterprises is many a times
""attributed to the business environment. For example, the decline of department stores in
the ?western markets is attributed to the general inability of those retailers to react quickly
and positively to environmental change.
Cyclical Theory
The most well known theory of retail evolution is The Wheel of Retailing theory. This
theory, described by McNair II, helps us understand retail changes. This theory suggests
that retail innovators often first appear as low-price operators with a low-cost structure and
low profit-margin requirements, offering some real advantages, such as specific
merchandise, which enables them to take customers away from more established
competitors.
As they prosper, they develop their businesses, offering a greater range or acquiring more
expensive facilities, but this can mean that they lose the focus that was so important when
they entered the market. Such 'trading up' occurs as the retailer becomes established in his
own right.
Conflict Theory
Conflict always exists between operators of similar formats or within broad retail
categories. It is believed that retail innovation does not necessarily reduce the number of
formats available to the consumer; instead, it leads to the development of more formats.
Retailing thus evolves through a dialectic process, i.e., the blending of two opposites to
create a new format.
This can be applied to Developments in retailing as follows: -a. Thesis
Individual retailers as corner shops all across the country
b. Antithesis
A position opposed to the thesis develops over a period of time. These are the department
stores. The antithesis is a "challenge" to the thesis.
c. Synthesis
There is a blending of the thesis and antithesis. The result is position between the "thesis"
and "antithesis". Super markets and hypermarkets thrive. This "synthesis" becomes the
"thesis" for the next round of evolution.
Fig.: Wheel of Retailing
Lecture no.: 6
Topic: Understanding the Retail Customer
A key challenge faced by the retailer is creating products and services which would be
successful in the market. The accurate understanding of consumer needs helps the retailer
create a product that is likely to be successful in the market. Consumer understanding or
an understanding of the consumer buying behaviour is the starting point of strategy
creation. It is not only important to understand what consumers know about a product. But
also what they do not know this helps in determining the channels of communication and
the products that need to be created to cater to the need of consumer. Evaluating consumer
knowledge can also help a firm assess. How well it has achieved its product positioning
goal. The firm needs to study consumers to see how it product perceived; if there is a good
match. the positioning strategy can be deemed to have been a success, Retailers need to
know the various influences that lead up to a purchase, not just the store where the purchase
was made. This includes looking at a host of external and internal influences, the process
starts with:
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Understanding how the need for a product/service was determined;
Understanding how information was sought by the customer;
The process of evaluation or \'various products and stores;
The payment process; and
The post purchase behavior
Factors influencing the retail shopper:
The behaviour of retail shoppers is a subject of study across the world. The basic difference
however Continues to be the maturity of markets and formats. While retail I in the West
has evolved in terms of formats over the past hundred years, organised retail in India are
still a new phenomenon
The factors which influence the customer's decision-making process are:
1. Range of Merchandise
The range of merchandise is perhaps the most important reason for customers to patronize
a particular outlet. The initial curiosity about the store may draw a consumer to a retail
store, but to convert him into a buyer and to retain him over a period of time is largely
dependent on the quality and the range of merchandise offered by the store. If the
merchandise is similar to that of another store or what is commonly available, the customer
may not see any reason why he should not switch stores.
The range of merchandise offered plays an important role in the
case of categories like durables, books and music, apparel and other lifestyle product.
2. Convenience of Shopping at a Particular Outlet
The element of convenience is fast gaining prominence in the world of organised retail.
This is especially true in case of items like grocery/fruits and chemists.
3. Time to Travel
The time required to reach a particular retail location is again fast becoming critical. This
is especially true in the case of metros like Mumbai, where travel time is high. This has
resulted in many local areas developing in terms of shopping, to facilitate buying. We see
the appearance of multiple outlets for a brand, departmental stores and malls making their
appearance across most Indian cities.
4. Socio-economic Background and Culture
The socio-economic background of the consumer largely determines his lifestyle. This
influences the kind of store that he may be comfortable shopping in. Consumer buying
behaviour varies from market to market and is largely influenced b the culture of the region,
for example, Asian culture is very different from Western culture3. The need hierarchy is
different for each market. The need that the retailer can fulfill needs to be clearly
understood by him. This will not only help him in determining the right merchandise mix,
but it will also help him in evolving an effective communication strategy.
5. The Stage of the Family Life Cycle
The stage of the family life cycle that the customer belongs to, also largely influences his
needs. For example, the needs of a young bachelor will be different from the needs of a
family with children in their teens, which will again be different from the requirements of
an elderly retired couple. The retailer needs to be clear about the target market that he is
catering to, as he cannot be everything to everybody.
Fig.: Customer Decision making process:
Lecture no.: 7
Ethical and Legal Issues in Retailing - An overview
Focus on the Customer
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Dealing with Ethical Issues
Awareness of Ethical issues
Moral Philosophy, Intentions and Behavior
The Organizational Environment
Company Ethics Programs
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Social Responsibility
Cost-free activities
Legally Mandated activities
Policy Influenced activities
Group Imposed activities
Interest-groups Coerced activities
Free-will activities
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Environmental Orientation
Waste reduction
Recycling
Packaging
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Legal Framework
Supplier Relations
Competitor Relations
Consumer Relations
Employee Relations
Lecture no.: 8 & 9
Unit-II
Topic: Retail marketing Strategy
The word strategy comes from ancient Greece. A strategos,' as an army general, and his
post was a strategia. Over time, strategia came to mean the craft of generalship instead
of just the job. The word spread to French as stratigie and then to English as "strategy" in
1980
Some of the definitions in use to
Which Steiner pointed, include the following:
1. Strategy is that which top management does that is of great importance to the
organization.
2. Strategy refers to basic directional decisions, that is, to purposes and missions.
3. Strategy consists of the important actions necessary to realize these directions.
4. Strategy answers the question: what should the organisation be doing?
5. Strategy answers the question: what are the ends we seek and how should we achieve
them.
The rise and subsequent fall of strategic planning brings us to the definition of strategy
put forth by Henry Mintzberg3. According to Henry Mintzberg, people use "strategy" in
several different ways, the most common being these four:
1. Strategy is a plan, a "how," a means of getting from here to there.
2. Strategy is a pattern in actions over time; for example, a company that regularly
markets very expensive products is using a "high end" strategy.
3. Strategy is position; that is, it reflects decisions to offer particular products or services
in particular markets.
4. Strategy is perspective, that is, vision and direction.
In Top Management Strategy, Benjamin Tregoe and John Zimmerman5 define strategy as
"the framework which guides those choices that determine the nature and direction of an
organisation", This can be interpreted as selecting products (or services) to offer and the
markets in which to alter them.
The notion of restricting the basis on which strategy might be
formulated has been carried one step farther by Michael Treacy and Fred Wierseman,
authors of The Discipline of Market Leaders6, Treacy and Wierseman assert that
companies achieve leadership positions by narrowing, not
broadening their business focus. Treacy and Wierseman identify three "value-disciplines"
that can serve as the basis for strategy: operational excellence, customer intimacy and
product leadership. As with driving forces, only one of these value disciplines can serve as
the basis for strategy. Tracy and Wierseman's three value disciplines are briefly defined
below:
1. Operational Excellence-Strategy is predicated on the production and delivery of
products and services. The objective is to lead the industry in terms of price and
convenience.
2. Customer Intimacy-Strategy is predicated on tailoring and shaping products and services
to fit an increasingly fine definition of the customer. The objective is long-term customer
loyalty and long-term profitability.
3. Product Leadership-Strategy is predicated on producing a continuous stream of state-of·
the-art products and services. The objective is the quick commercialization of new ideas.
Each of the three value disciplines suggests different requirements. Operational excellence
implies world-class marketing, manufacturing and distribution processes. Customer
intimacy suggests staying close to the customer and entails long-term relationships.
Product leadership clearly hinges on market-focused R & D, as well as on organisational
nimbleness and agility. What, then, is strategy? Is it a plan? Is it a method of doing
business? Is it a position taken? Strategy is all these - it is perspective, position, plan and
pattern. Strategy is the bridge between policy or high-order goals on the one hand and
tactics or concrete actions on the other Strategy and tactics together bridge the gap between
ends and means. Strategy is a general framework that provides guidance for actions to be
taken and, at the same time, is shaped by the actions taken. This means that the necessary
precondition for formulating strategy is a clear and widespread understanding of the ends
to be obtained.
Fig. Steps involved in developing a retail strategy
Lecture no.: 10
Topic: Retail Franchising.
In order to understand the concept of franchising, let us start by studying some definitions
of the term franchising:
Webster’s dictionary defines "franchise" as - "1. A privilege or right granted to a person
or a group
by a government, state, or sovereign. 2. Authorization granted by a manufacturer to a
distributor or dealer to sell his products."
According to the International Franchise Association, a franchise is a "continuing
relationshi1 in which the franchisor provides a licensed privilege to do business, plus
assistance in organizing training, merchandising, and management, in return for a
consideration from the franchisee.' The legal definition expands this meaning - a franchise
may also extend the right to use a predetermined method for marketing products or
services, through outlets that use a known name or trademark. Franchising is not a business
or an industry, but it is a method used by business for the marketing and distribution of
products or services
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The two parties which emerge are:
a) The Franchisor and
b) The Franchisee
Types of Franchising
The basic objective of franchising is the expansion of a business, by furthering the
distribution of products/services. By virtue of this fact, at a very broad level, franchising
can be divided into two formats. The first type being a product trade name franchise and
the second, a business format franchise.
Under product/trade name franchising, the franchisee concentrates on one manufacturer's
product, and thereby acquires the manufacturer's identity to some extent. Typical examples
are automobile dealerships and gas service stations. Business format franchising has been
defined as the granting of a license for a predetermined financial return, by a franchising
company (the franchisor) to its franchisees, entitling them to make useofa complete
business package, including training, support and the corporate name; thus enablingthem
to operate their own businesses according to exactly the same standards and "format" asthe
other units in the franchised chain. Examples of business format franchising include
restaurants. convenience stores, and personal and business services.
Fig.: Franchise relation.
Lecture no.: 11 & 12
Topic: Retail store Location & site selection.
Location has been considered the most important ‘p’ in retailing. Location of e retail store
is important as it conveys a fair amount of the image of the store.
Steps involved in choosing a retail location:
1. Market identification
2. Determining the market potential
a) Demographic features of the population
b) The characteristics of the households in the area.
c) Competition and compatibility
d) Laws and regulation
e) Trade area analysis
3. Identify alternative site.
4. Select the site.
Special Considerations
Retail shop may require special considerations. Make a list of any unique characteristic of
your business that may need to be addressed.
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Will the store require special lighting, fixtures or other hardware installed?
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Are restrooms for staff and customers available?
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Is there adequate fire and police protection for the area?
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Is there sanitation service available?
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Does the parking lot and building exterior have adequate lighting?
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Does the building have a canopy that provides shelter if raining?
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What is the crime rate in the area?
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Are there (blue laws) restrictions on Sunday sales?
Other factors:
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Accessibility, Visibility and Traffic
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Signage, Zoning and Planning
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Competition and Neighbors
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Population and Your Customer
Before choosing a retail store location, define how you see your business, both now
and in the future:
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What do your customers look like?
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Can you visualize your building?
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Do you know what you want to sell and what you want your business to be known
for?
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Have you determined how much retail space, storage area, or the size of the office
you need?
Without the answers to these basic questions, it will be hard to find the perfect location
for generating the maximum amount of profit for your retail store.
Type of Goods
Examine what kind of products you sell, as some goods will require certain types of
locations. Would your store be considered a convenience store, a specialty shop or a
shopping store?
Convenience goods require easy access, allowing the customer to quickly make a
purchase. A mall would not be a good location for convenience goods. This product type
is lower priced and purchased by a wide range of customers.
Specialty goods are more unique than most products and customers generally won't mind
traveling out of the way to purchase this type of product. This type of store may also do
well near other shopping stores.
A shopping store usually sells items at a higher price which are bought infrequently by
the customer. Furniture, cars and upscale clothing are examples of goods found at a
shopping store. Because the prices of theses items are higher, this type of customer will
want to compare prices before making a purchase. Therefore, retailers will do well to
locate their store near like stores.
Lecture no.:13
Topic: Retail store design
Plan your store layout, atmosphere, and create irresistible visual merchandising displays.
View floor plans and other retail store designs. Learn how to select and care for store
fixtures, as well as using special lighting techniques to accent your products. Find store
layout software and browse our resource of vendors selling store fixtures and displays.
Elements of store environment:
a) Store Image
b) Store Theme
c) Store Atmosphere
Elements of External store design:
1. Building Architecture
a) Frontage & Entrance.
b) Health & safety
c) External Display space
2. Location
a) Parking
b) Access
3. Store Theme
a) Target customers
b) Merchandise mix
Elements of Internal store design:
1. Atmospherics & Aesthetics
2. Space planning
3. Layout.
Lecture no.: 14
Topic: Visual merchandising
Visual merchandising, until recently called simply merchandising, is the activity of
promoting the sale of goods, especially by their presentation in retail outlets.(New Oxford
Dictionary of English, 1999, Oxford University Press). This includes combining product,
environment, and space into a stimulating and engaging display to encourage the sale of a
product or service. It has become an important element in retailing that is a team effort
involving senior management, architects, merchandising managers, buyers, the visual
merchandising director, designers, and staff.
Visual merchandising starts with the store building
itself. The management decides on the store design to reflect the products the store is going
to sell and how to create a warm, friendly, and approachable atmosphere for its potential
customers.
Many elements can be used by visual merchandisers in creating displays, including color,
lighting, space, product information, sensory inputs such as smell, touch, and sound as well
as technologies such as digital displays and interactive installations.
Visual merchandising is not a science; there are no absolute rules. It is more like an art in
the sense that there are implicit rules but that these also exist to be broken for striking
effects. The main principle of visual merchandising is that it is intended to increase sales,
which is not the case with a "real" art.
Visual Merchandising helps in:
•
Educating the customers about the product/service in an effective and creative
way.
•
Establishing a creative medium to present merchandise in 3D environment,
thereby enabling long lasting impact and recall value.
•
Setting the company apart in an exclusive position.
•
Establishing linkage between fashion, product design and marketing by keeping
the product in prime focus.
•
Combining the creative, technical and operational aspects of a product and the
business.
•
Drawing the attention of the customer to enable him to take purchase decision
within shortest possible time, and thus augmenting the selling process.
Purpose:
Retail professionals display to make the shopping experience more comfortable,
convenient and customer friendly by:
•
Making it easier for the shopper to locate the desired category and merchandise.
•
Making it easier for the shopper to self-select.
•
Making it possible for the shopper to co-ordinate & accessorize.
•
Providing information on sizes, colors & prices.
•
Informing about the latest fashion trends by highlighting them at strategic
locations.
Lecture no.:15
Topic: CRM in Retail
Customer relationship management (CRM) consists of the processes a company uses to
track and organize its contacts with its current and prospective customers. CRM software
is used to support these processes; information about customers and customer interactions
can be entered, stored and accessed by employees in different company departments.
Typical CRM goals are to improve services provided to customers, and to use customer
contact information for targeted marketing.
While the term CRM generally refers to a software-based
approach to handling customer relationships, most CRM software vendors stress that a
successful CRM effort requires a holistic approach.[1] CRM initiatives often fail because
implementation was limited to software installation, without providing the context, support
and understanding for employees to learn, and take full advantage of the information
systems.[2] CRM can be implemented without major investments in software, but software
is often necessary to explore the full benefits of a CRM strategy.
Strategy:
The objectives of a CRM strategy must consider a company’s specific situation and its
customers' needs and expectations. Information gained through CRM initiatives can
support the development of marketing strategy by developing the organization's knowledge
in areas such as identifying customer segments, improving customer retention, improving
product offerings (by better understanding customer needs), and by identifying the
organization's most profitable customers.
CRM strategies can vary in size, complexity, and scope. Some companies consider a
CRM strategy only to focus on the management of a team of salespeople. However, other
CRM strategies can cover customer interaction across the entire organization. Many
commercial CRM software packages provide features that serve the sales, marketing, event
management, project management, and finance industries.
From this perspective, CRM has for some time been seen to play an important role in many
sales process engineering efforts.
Lecture no.: 16 & 17
Unit-III
Topic: Retail Merchandising
Merchandising refers to the methods, practices and operations conducted to promote and
sustain certain categories of commercial activity. The term is understood to have different
specific meanings depending on the context. Merchandise is a sale goods at a store
Merchandising, as commonly used in marketing, means maximizing merchandise sales
using product design, selection, packaging, pricing, and display that stimulates consumers
to spend more. This includes disciplines in pricing and discounting, physical presentation
of products and displays, and the decisions about which products should be presented to
which customers at what time.
This annual cycle of merchandising differs between countries and even within them,
particularly relating to cultural customs like holidays, and seasonal issues like climate
and local sporting and recreation.
Factors affecting Merchandising function:
1. Organization function.
2. Size of organization.
3. Types of store.
4. Merchandise to be carried.
The basic duties of merchandising are:
a) Planning
b) Directing
c) Coordinating
d) Controlling
Lecture no.: 18
Topic: Process of retail merchandising
Stages in Merchandising Planning are:
1. Developing Sales Forecast
a) Reviewing past sales
b) Analyzing the changes in the economic condition
c) Analyzing the changes in the sales potential
d) Analyzing the changes in the marketing strategies of the retail organization and
the competition.
e) Creating the sales forecast
2. Determining the Merchandise Requirements
a) Creation of merchandise budget
b) Assortment planning
3. Merchandise Control
- The Open to Buy.
4. Assortment planning
a) The range plan
b) The Model Stock plan
Lecture no.: 19 & 20
Topic: Methods of Merchandise procurement
Procurement means finding or seeking out products from different places, manufacturer
or supplier. It is a key element of retail. The process of merchandise buying is a five step
process which is as follows:
1. Identify the source of supply:
It needs to be decided at this time, whether the product
will be sourced from the domestic market or the international market. Domestic source of
supply located by visiting central markets, trade shows or expositions.
Cost associated with global market includes:
a) Country of origin effects.
b) Foreign currency fluctuations.
c) Tariffs.
d) Foreign trade zone.
e) Cost of carrying inventory.
f) Transportation cost.
2. Contacting and evaluating the sources of supply.
Key factors to be kept in mind for evaluation are:
a) The merchandise itself. The quality of merchandise is as important as the price
that is going to be charged.
b) The price that the merchandise will be made available to the retail chain.
c) The adaptability of the supplier to the requirements of the retailers.
d) Delivery is an important factor in retail.
3. Negotiating with Vendors.
Following types of discount that will be made available to the buyer:
a) Trade discount.
b) Chain discount.
c) Quantity discount
d) Seasonal discount
e) Cash discount
4. Establishing Vendor Relation.
The buyer need to build on :
a) Mutual Trust.
b) Open Communication.
c) Common Goal.
d) Credible commitments.
5. Analyzing Vendor performance.
On following basis:
a) The total order placed
b) The total return to the vendor, the quality of merchandise.
c) The initial markup on the products
d) The markdowns, if any
e) Transportation expenses if borne by the retailer
f) Cash discount offered by the vendor
g) The sale performance of the merchandise.
Lecture no.: 21
Topic: Retail Pricing
There are many outside influences that affect profitability and a retailer's bottom line.
Setting the right price is a crucial step toward achieving that profit. Retailers are in business
to make a profit, but figuring out what and how to price products may not come easily.
Before we can determine which retail pricing strategy to use in setting the right price, we
must know the costs associated with the products. Two key elements in factoring product
cost is the cost of goods and the amount of operating expense.
The cost of goods includes the amount paid for the product, plus any shipping or handling
expenses. The cost of operating the business, or operating expense, includes overhead,
payroll, marketing and office supplies.
Regardless of the pricing strategy used, the retail price of the products should more than
cover the cost of obtaining the goods plus the expenses related to operating the business.
A retailer simply cannot succeed in business if they continue to sell their products below
cost.
Retail Pricing Strategies
Now that we understand what our products actually cost, we should look at how our
competition is pricing their products. Retailers will also need to examine their channels of
distribution and research what the market is willing to pay.
Many pricing strategies exist and each is used based on particular a set of circumstances.
Here are a few of the more popular pricing strategies to consider:
Mark-up Pricing
Markup on cost can be calculated by adding a pre-set (often industry standard) profit
margin, or percentage, to the cost of the merchandise.
Markup on retail is determined by dividing the dollar markup by retail.
Be sure to keep the initial mark-up high enough to cover price reductions, discounts,
shrinkage and other anticipated expenses, and still achieve a satisfactory profit. Retailers
with a varied product selection can use different mark-ups on each product line.
Vendor Pricing
Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller
retail shops to avoid price wars and still maintain a decent profit. Some suppliers have
minimum advertised prices but also suggest the retail pricing. By pricing products with the
suggested retail prices supplied by the vendor, the retailer is out of the decision-making
process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an
advantage over the competition.
Competitive Pricing
Consumers have many choices and are generally willing to shop around to receive the best
price. Retailers considering a competitive pricing strategy will need to provide outstanding
customer service to stand above the competition.
Pricing below competition simply means pricing products lower than the competitor's
price. This strategy works well if the retailer negotiates the best prices, reduces costs and
develops a marketing strategy to focus on price specials.
Prestige pricing, or pricing above competition, may be considered when location,
exclusivity or unique customer service can justify higher prices. Retailers that stock highquality merchandise that isn't available at any other location may be quite successful in
pricing their products above competitors.
Other Pricing Strategies
Keystone pricing is not used as often as it once was. Doubling the cost paid for
merchandise was once the rule of pricing products, but very few products these days allow
a retailer to keystone the product price.
Multiple pricing is a method which involves selling more than one product for one price,
such as three items for $1.00. Not only is this strategy great for markdowns or sales events,
but retailers have noticed consumers tend to purchase in larger amounts where the multiple
pricing strategy is used.
Discount pricing and price reductions are a natural part of retailing. Discounting can
include coupons, rebates, seasonal prices and other promotional markdowns.
Lecture no.: 22
Topic: Evaluating Merchandise Performance.
Measuring the performance is necessary in order to gain an understanding of the products
that have performed well and which have not as per the target.
Retailers calculate inventory turnover in several ways:
1. Net sales/average inventory at retail.
2. Cost of merchandise sold/average inventory at cost.
3. Units sold/average units in inventory.
4. Net sales = turnover * average inventory at retail.
5. Average inventory at retail = net sales/turnover.
There are three methods of analyzing merchandising performance:
1. ABC analysis.
2. Sell Through Analysis
3. Multiple Attribute Method
The concept of Gross Margin Return on investment:
Ratio measuring inventory profitability as it relates to the gross profit margin earn on
sales.An important tool in analyzing inventory, sales and profitability is GMROI (also
known as GMROII) which stands for Gross Margin Return on Inventory Investment. The
GMROI calculations assist buyers in evaluating whether a sufficient gross margin is being
earned by the products purchased, compared to the investment in inventory required to
generate those gross margin dollars.
Here's How:
•
•
•
•
Find the average inventory at cost.
Calculate the gross margin of the item.
Divide the gross margin by the average cost of inventory to get GMROI.
The result is a ratio indicating the number of times gross margin is earned from the
inventory investment.
GMROI calculation can be used to measure the performance the entire shop, but it is more
effective if used for a particular department or category of merchandise.
Lecture no.: 24
Topic: Retail communication mix
Communication is an integral part of the retailer’s marketing strategy. It is used to inform
the customers about the retailer, the merchandise and its services. It also serve as a tool for
building the store image.
The retailer can use various channels for communication. The most common tools are:
1.
2.
3.
4.
5.
Advertising
Sales promotion
Public relation
Personal selling
Direct marketing
A communication program can be designed to achieve a variety of objectives for the
retailer, such as building a brand image of the retailer in the customer's mind, increasing
sales and store traffic, providing information about the retailer's location and offering, and
announcing special activities.
Retailers communicate with customers through advertising, sales promotions, Web sites,
store atmosphere, publicity, personal selling, e-mail, and word of mouth. These elements
in the communication mix must be coordinated so customers have a clear, distinct image
of the retailer and not be confused by conflicting information.
Many retailers use rules of thumb to determine the size of the promotion budget. Marginal
analysis, the most appropriate method for determining how much must be spent to
accomplish the retailer's objectives, should be used to determine whether the level of
spending maximizes the profits that could be generated by the communication mix.
The largest portion of a retailer's communication budget is typically spent on advertising
and sales promotions. A wide array of media can be used for advertising. Each medium
has its pros and cons. Newspaper advertising is effective for announcing sales, whereas TV
ads are useful for developing an image. Sales promotions are typically used to achieve
short-term objectives, such as increasing store traffic over a weekend. Most sales
promotions are supported in part by promotions offered to the retailer by its vendors.
Publicity and word of mouth are typically low-cost communications, but they are very
difficult for retailers to control.
Lecture no.: 24 & 25
Unit-IV
Topic: Retail Store Operation.
Store operation resources, daily procedures, creating internal controls and systems,
establishing retailing functions and other day-to-day retail store operations.
For store operations we help our clients to
•
Improve productivity and service
•
•
•
Design effective customer journeys
Implement click and collect, and store ordering
Select, design and implement EPOS and back of store solutions
In retail store following task needs to be performed:
1. Store Administration and management of the premises.
2. Managing Inventory and Display.
3. Managing Receipts.
4. Customer Service
5. Managing promotions, Events, Alliance, and Partnership.
The five S’s of retail operation:
➢
➢
➢
➢
➢
➢
Systems
Standards
Stock
Space
Staff
Shopper’s benefit
Lecture no.: 26
Topic: Servicing the retail customer
Customer service is a task that involves interactions with customers in person or
telecommunications, mail or automated processes.
Few key tasks are:
1. Identify key customers and listen and respond to them.
2. Define superior service and establish a service strategy.
3. Set standards and measure performance.
4. Select, train and empower employees to work for the customers.
5. Recognize and reward accomplishment.
Those working in the “bagger” position contribute to the profitability of a retail operation
by enhancing customer service satisfaction and strengthening customer loyalty. A retail
operation employs baggers solely for the purpose of improving their customers’ purchase
experience at the point of sale. Therefore, in addition to increasing the speed and efficiency
of the checkout process, baggers are a key point of customer contact.
By interacting with customers in a polite, friendly and accommodating manner, baggers
help create the best possible last impression with each customer.
Key Responsibilities:
Baggers are integral members of the team, providing support to both customers and staff
members. Merchandise handling is just one aspect of a bagger’s responsibilities. Baggers
also perform tasks that contribute significantly to customer service and the smooth
operation of the store in general.
Merchandise Handling:
The primary task of the bagger is to package each customer’s purchases so that they can
be transported safely and easily between the store and the customer’s home. Merchandise
needs to be handled with care to preserve the quality and value of each purchase. Bags and
boxes must be thoughtfully chosen for the size, shape, and weight of the purchases, and
items should be wrapped for protection when appropriate.
Customer Service:
A store that employs baggers values customer care and efficiency. Baggers must be
proficient in their tasks, but it is equally important for them to interact with customers using
eye contact, smiles, and polite conversation.
Knowing the location of merchandise is essential for baggers. In addition to answering
customer questions, baggers will be checking prices, retrieving merchandise, and returning
unwanted items to the shelves. When appropriate, baggers will help customers take
purchases to their vehicles. It is vital that this last impression be positive, and whenever
possible, memorable.
General Store Operations:
Operational duties start in the checkout area where you will be expected to keep things
clean, organized and well stocked. As a bagger, you will also assist with restocking,
straightening, fronting, facing, and dusting merchandise shelves and displays. Other
general housekeeping duties might include sweeping, mopping, and cleaning restrooms.
While performing tasks, baggers should be aware of customer needs, and offer assistance
proactively.
Often baggers will be responsible for tending to the store's exterior, retrieving carts, and
removing debris from the parking lot and sidewalks.
Prior Experience:
The bagger position is an entry level job, and requires no prior work experience. Employers
will sometimes even hire you for a bagger job before you are 16, with an appropriate work
permit and parental permission.
Qualifications:
Retail employers want people who are friendly, diligent, and upbeat for this position.
Organization, efficiency and enthusiasm are needed for baggers to succeed in a fast paced
environment. Good verbal communication and reading skills are essential for frequent
customer and employee interactions. You must also take directions well and be dependable
in this job.
Physical Requirements:
The bagger position is physically demanding, and you will be expected to be able to stand
and walk for your entire scheduled shift. Also, depending on the type of merchandise the
store sells, you may be expected to frequently bend, twist, reach, stretch, kneel, squat, push,
pull, and lift up items that may weigh up to 75 pounds. You may also be exposed to extreme
temperature changes as you travel frequently between indoor and outdoor environments.
Additional Requirements:
The bagger position is generally a part-time position, and employers will usually be flexible
with scheduling in order to accommodate school and other family obligations. Baggers can
expect to work weekends when shopping traffic is heavy. It will be essential for you to
demonstrate good hygiene when working as a bagger, and have a neat and clean appearance
at all times in order to make the best possible impression on the customers.
Education Requirements:
There are no educational requirements for this position. Often people work as baggers
while attending high school or college.
Compensation:
Because it is an entry level position requiring no previous experience, baggers are often
paid an hourly minimum wage. The bagger job is usually a part-time position, and
therefore, there are few, if any, benefits offered. Generally you will receive some type of
employee discount when you purchase merchandise from the store.
Lecture no.: 27
Topic: Retail HRM
Human Resource Managements role in the company’s success increases each day. In this
article I will discuss the reasons for the increasing impact of the HRM and will also talk
about HRM in the retail industry.
Human Resource Management is a vital function in organizations. It is becoming more
important than ever. Line managers are getting involved in HRM, and human resource
managers are becoming members of the management team. Also, everyone in the
organization can make a contribution to the management of people and the success of the
organization at the same time. Human resource management includes a variety of activities,
such as the following:
What staffing needs to have and whether to use independent contractors or hire employees
to fill these needs Recruiting and training the best employees, ensuring they are high
performers Dealing with performance issues and ensuring its personnel and management
practices conform to various regulations.
This report will contain the following topics:
* The special Human Resource Environment of retailing
* The process of Human Resource Management in Retailing
* Human Resource planning
* Recruitment & Selection
* Training & Development
* Performance management
The Special Human Resource Environment of Retailing
Staffs are a major resource in any business. This is particularly true in retail industry, which
has a very large amount of employees and which provides a range of services to its
customers. The retail human resource environment has its special features: a large number
of inexperienced workers, long hours, highly visible employees, many part-time workers,
and variations in customer demand. Those features also create difficulties to retailers.
First of all, a large number of inexperienced workers and part-time staffs in a retail business
may lead high employee turnover, poor performance, lateness and absenteeism. This is due
to several seasons. One is that inexperienced workers can apply retail positions, such as
check out clerks, wrappers, stock clerks and some types of sales personnel, which doesn't
require high education, training and skill. The other one is that employees who work in
retailing companies likely live near the retailing stores. In addition, part-time staffs are very
easy to quit their jobs.
Secondly, long working hours may result that retailers need to two shifts of employees. As
the trend of longer store hours (evening and weekend), retailers need to consider employ
staff for evening and weekend use.
Thirdly, high visible employees mean that retailers have to monitor employees very
closely. As consumers nowadays play a very important role in retail industry and
employees are highly visible to the consumers, retailers must select and train employees
carefully, especially care about their manners and appearance.
The process of Human Resource Management in Retailing
The four main activities of the process of Human Resource Management are Planning,
Recruitment and Selection, Training and Performance. When retailers are applying the
Human Resource Management process, the labor laws, diversity and employee privacy has
to be considered.
Planning
By analyzing the current workforce will allow the company to evaluate the department
performance and helps to realize what kind of staff are required in order to form the skills
which they needed. Retailers need to employ the right number of staff in order to make the
workforce more efficiency. Too many employees will increase costs, and too few will not
able to carry out of its work. Therefore, retailers have to analyze both current human
resources within the retailing organizations, and future plans or strategies of the
organization and the effect on human resource.
Meanwhile, because of the special human resource environment in the retail industry, the
effects of the labor market factors have to be considered for their human resources
planning. Due to the development of Information Technology, companies may not be able
to find the employees who have the skills they required. In addition, internal staffing factors
such as labor turnover, sickness or accident rates also have to be considered. However,
planning has to be thought out carefully, and updated when other factors have changed.
Take boots as an example, they evaluate the local market trend and qualification of local
population, etc and seek to the staff that need to form the skills they lack.
This process takes time to operate. However, it is less expensive than the recruitment and
selection process. Meanwhile, it will be helpful to find the employees who already have
the skills that the retailers require.
Recruitment & Selection
Recruitment is the process of identifying the need for a new employee, defining the job
and the appropriate person for it, attracting a number of suitable candidates, then selecting
the one best suited to the job.
When a company is looking for new employees, they tend to use different channels in order
to find the most suitable personnel. The channels could be educational institution,
TV/magazine advertising, agency or any other channels which is the best way to find the
right personnel. For example, in a retail company, when they are looking for entry level
sales personnel, they tend to reply on educational institutions, advertisements and
employee recommendations. Moreover, when a retail company is looking for middlemanagement positions, they are likely to use employment agencies, competitors,
advertisements and current employees. The recruitment process can be very costly. It takes
a great deal of time to set up an effective recruitment process. Therefore, the company has
to carry this job out in a systematic way.
The next job is to select new employees from among those the company has recruited. The
main objective in the selection process is to match the character of potential employees
with the requirements of the jobs to be filled. The process of selection includes job analysis
and description, the application blank, interviewing, testing, references and a physical
examination.
Lecture no.:28
Topic: Financial aspect of retail management
The Income Statement:
It is a record of the revenues earned by an organization and the expenses incurred.
Income Statement is a snapshot of a company’s operational performance for a particular
period of time.
The components of an income statement:
a) Sales
b) Cost of goods sold.
c) Gross margin.
d) The operating expenses
e) The net profit.
The Balance Sheet:
It gives details of the company’s assets and liability at a particular point of time. It is like
a financial snapshot of the company’s financial situation at a particular point of time.
Key elements of Balance Sheet are:
a) Fixed assets
b) Current assets
c) Long term liability
d) Short term liabilities
e) The net worth.
Ratio Analysis:
It is comparing the number against previous years, other companies, and the industry.
Key ratios which are usually analyzed are:
1) Profitability ratios:
a) Operating profit margin.
b) Net profit margin
c) Return on capital employed
2) Liquidity ratios:
a) Current ratio
b) Quick ratio
3) Financial leverage ratios.
4) Earning coverage ratios:
a) Earning per share
b) Price-earning ratio
c) Dividend yield
Lecture no.: 29
Topic: Retail Information system
Information Technology is used in the retail business to capture accurate information and
make it available to warehouses, distributors, manufacturers. The use of information
technology in retail includes software, hardware, wire line and wireless communication
The importance of information technology in retail:
2. Efficient stoking of merchandise.
3. Collection of data.
4. Efficiency in operation.
5. Helps communication.
Factors affecting the use of technology:
1. The scale and scope of operation.
2. The financial resources available to the organization.
3. The nature of business.
4. Human resource available.
APPLICATIONS OF TECHNOLOGY
1. Electronic Data Interchange (EDI).
2. Database Management, Data Warehousing, Data Mining.
3. Radio Frequency Identification (RFID).
4. E commerce.
Across the world, E-tailing is the fastest growing segment in e-commerce today.
E-marketing Mix:
•
Cost
•
Convenience
•
Connectivity
•
Customer interface
•
Speed of delivery
Lecture no.: 30
Topic: Supply Chain Management
Supply Chain Management encompasses the planning and management of all activities
involved in sourcing, procurement, conversion, and logistics management activities.
Importantly, it also includes coordination and collaboration with channel partners, which
can be suppliers, intermediaries, third-party service providers, and customers. In essence,
Supply Chain Management integrates supply and demand management within and across
companies.
Supply Chain Management can also refer to Supply chain management software which is
tools or modules used in executing supply chain transactions, managing supplier
relationships and controlling associated business processes.
Supply chain event management (abbreviated as SCEM) is a consideration of all possible
occurring events and factors that can cause a disruption in a supply chain. With SCEM
possible scenarios can be created and solutions can be planned.
Developments in Supply Chain Management:
Six major movements can be observed in the evolution of supply chain management
studies: Creation, Integration, and Globalization
1. Creation Era
The term supply chain management was first coined by an American industry consultant
in the early 1980s. However the concept of supply chain in management, was of great
importance long before in the early 20th century, especially by the creation of the assembly
line. The characteristics of this era of supply chain management include the need for large
scale changes, re-engineering, downsizing driven by cost reduction programs, and
widespread attention to the Japanese practice of management.
2. Integration Era
This era of supply chain management studies was highlighted with the development of
Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s
by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued
to develop into the 21st century with the expansion of internet-based collaborative systems.
This era of SC evolution is characterized by both increasing value-added and cost reduction
through integration.
3. Globalization Era
The third movement of supply chain management development, globalization era, can be
characterized by the attention towards global systems of supplier relations and the
expansion of supply chain over national boundaries and into other continents. Although
the use of global sources in the supply chain of organizations can be traced back to several
decades ago (e.g. the oil industry), it was not until the late 1980s that a considerable number
of organizations started to integrate global sources into their core business. This era is
characterized by the globalization of supply chain management in organizations with the
goal of increasing competitive advantage, creating more value-added, and reducing costs
through global sourcing.
4. Specialization Era -- Phase One -- Outsourced Manufacturing and Distribution
In the 1990s industries began to focus on “core competencies” and adopted a specialization
model. Companies abandoned vertical integration, sold off non-core operations, and
outsourced those functions to other companies. This changed management requirements
by extending the supply chain well beyond the four walls and distributing management
across specialized supply chain partnerships.
This transition also re-focused the fundamental perspectives of each respective
organization. OEMs became brand owners that needed deep visibility into their supply
base. They had to control the entire supply chain from above instead of from within.
Contract manufacturers had to manage bills of material with different part numbering
schemes from multiple OEMs and support customer requests for work -in-process visibility
and vendor-managed inventory (VMI).
5. Specialization Era -- Phase Two -- Supply Chain Management as a Service
Specialization within the supply chain began in the 1980s with the inception of
transportation brokerages, warehouse management, and non asset based carriers and has
matured beyond transportation and logistics into aspects of supply planning, collaboration,
execution and performance management.
Outsourced technology hosting for supply chain solutions debuted in the late 1990s and
has taken root in transportation and collaboration categories most dominantly. This has
progressed from the Application Service Provider (ASP) model from approximately 1998
through 2003 to the On-Demand model from approximately 2003-2006 to the Software as
a Service model we are currently focused on today.
6. Supply Chain Management 2.0 (SCM 2.0)
Building off of globalization and specialization, SCM 2.0 has been coined to describe
both the changes within the supply chain itself as well as the evolution of the processes,
methods and tools that manage it in this new "era".
Supply chain management must address the following problems:
•
•
Distribution Network Configuration: Number, location and network missions of
suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.
Distribution Strategy: Including questions of operating control (centralized,
decentralized or shared); delivery scheme (e.g., direct shipment, pool point
shipping, Cross docking, DSD (direct store delivery), closed loop shipping); mode
of transportation (e.g., motor carrier, including truckload, LTL, parcel; railroad;
intermodal, including TOFC and COFC; ocean freight; airfreight); replenishment
strategy (e.g., pull, push or hybrid); and transportation control (e.g., owneroperated, private carrier, common carrier, contract carrier, or ). Trade-Offs in
Logistical Activities
Supply Chain Management and Logistics for the Retail Industry
Retail
«Supply chain management for retail companies strives to control product quality,
inventory levels, timing, and expenses. A clear supply chain strategy with differentiated
service offerings and delivery terms is essential to optimizing the balance of cost and
required customer service. An integrated approach considering supply, production,
transportation, operations and service is crucial to design the most competitive retail
logistics concept for your company. Miebach Consulting Group has extensive experience
designing and implementing innovative solutions for the largest fast moving consumer
goods and retail companies worldwide.»
Trends in Logistics for Fast Moving Consumer Goods & Retail
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Enable collaboration between all partners of the supply chain: vendors, production
plants, transportation and retail
Globalization of the retail supply chain with increasingly important issues such as
risk management, response and leadtime
Optimization on local and regional level, introducing concepts such as
crossdocking, just in time delivery, milk run
Enhancing visibility of product flows through track and trace, Radio Frequency
Identification (RFID) technology
Miebach Consulting Services
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Supply Chain analysis and audit, to identify quick wins and potential improvements
Design and implementation of customized distribution networksfor retail
Material handling engineering for plant warehouses and distribution centers
Project management, start-up and fine-tuning of logistics facilities
Training of operators
Activity based costing, demand and inventory planning